Panicos Demetriades's picture
Affiliation: 
University of Leicester
Credentials: 
Professor of financial economics
Former Governor, Central Bank of Cyprus and ECB Governing Council member

Voting history

The UK Productivity Puzzle

In the last two questions you are asked which government policies are best suited to help the UK emerge from its productivity growth slowdown. Question 3 asks for your most preferred policy option, while question 4 asks for your second choice. You may use the comment section to outline specific policy recommendations.

Question 3: Which of the following policies would best help improve private sector productivity?

Answer:
Regulatory and competition policies, possibly including financial regulation
Confidence level:
Very confident
Comment:
In the long run, reward structures in finance should be more in line with productive sectors, so that more human capital is attracted to R&D and innovation. Although there has been progress in financial regulation since the crisis, more needs to be done to ensure that talent is more evenly distributed across the economy and that more talent is directed into R&D. Competition policy can help change relative rewards to facilitate that.

Question 2: Which of the following was the second most important cause for the slowdown in UK productivity growth?

Answer:
Human capital including education and employee skills
Confidence level:
Confident
Comment:
See my above analysis - which can justify all three mechanisms at play, human capital misallocation, insuffficient investment in R&D and labour market conditions. On top of that, the crisis and the austerity policies that followed because of the large fiscal costs of bailing out banks have impacted negatively on public capital investments including schools, hispoitals and education, aggravated income inequality and increased uncertainty, eventually leading to Brexit and even more uncertainty. How can we expect private investment that enhances long run growth and productivity after that? It’s important to understand the deeper cause of all this - unregulated finance. Even within economics, the best talent isn’t allocated to understanding this, macroeconomists continue to be ignorant of banks, default and financial regulation.

Labour Markets and Monetary Policy

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Question 2: Do you agree that, in a period of great uncertainty and after a prolonged period of weak real wage growth, monetary policy makers can afford to wait for greater certainty about real wage developments and building inflationary pressure before raising interest rates?

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Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
This is not the time to be raising interest rates, the BoE should wait to see how Brexit negotiations unfold. Let’s not forget any inflationary pressures to date have been due to the falling value of the pound because of Brexit uncertainty. If we have a positive outcome, inflationary pressures will recede further.

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Question 1: Do you agree that a strong labour market is a good indicator of building inflationary pressure?

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Answer:
Disagree
Confidence level:
Very confident
Comment:
The Phillips curve has indeed weakened for the valid reasons you have provided above. The most important ones are the increased labour mobility and decreased union power, These reasons aren’t transient, they are here to stay.

House Prices and the UK economy

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Question 2: Do you agree that a more widespread weakening of the UK housing market will slow UK GDP growth significantly?

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Make sure to save each question separately

Answer:
Disagree
Confidence level:
Confident
Comment:
London prices reflect its importance as a financial centre. That has to some extent distorted everything else. With London property prices becoming normalised, younger workers will find it more affordable to move back in and that will certainly have positive effects on productivity in other sectors.

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